Zillow: Home Values Rise at Fastest Pace Since 2006

U.S. home prices rose by 6.5 percent over the past year, said Zillow Inc., Seattle, the fastest annual pace since August 2006, near the peak of housing bubble prices.

The company’s November Real Estate Market Report said the median U.S. home value rose to $192,500, just 2 percent shy of the 2007 peak.

Additionally, Zillow said rents rose at a record pace in 2016, by 1.5 percent to $1,403 per month, although the report noted some slowing toward the end of the year. Zillow said rents are expected to increase at a 1.5 percent rate through 2017.

At their fastest pace, home values across the country appreciated by 11 percent year-over-year. During the recession, home values plummeted, falling 7.4 percent year-over-year during the depths of the crisis, and then began a steady recovery in 2012.

“Home value growth continues to be strong, supported by solid buyer demand and still limited for-sale inventory in many markets across the country,” said Zillow Chief Economist Svenja Gudell. “Conditions today are very different than the ones we saw back in 2006, which was the last time we saw home values rising this fast. Rampant real estate speculation and loose mortgage credit have been replaced by the sound economic fundamentals we are seeing now.”

As for home prices, Zillow noted strong growth in a handful of new powerhouse markets, including Seattle, Denver, Portland and Dallas, whose strong job markets attracted new home buyers over the last year.

Portland, Seattle and Dallas reported the highest year-over-year home value appreciation among the 35 largest U.S. metros. Portland home values rose 14 percent to a median value of $351,800. Both Seattle and Dallas home values rose 12 percent since last November.

Seattle reported the fastest rent appreciation of the 35 largest U.S. metros for the sixth month in a row, up nearly 9 percent annually. Portland and Sacramento followed, with rents up by 7 percent.

Gudell said inventory remains an issue for home buyers across the country, with 6 percent fewer homes to choose from than a year ago. Boston, Indianapolis and Kansas City reported the greatest drop; in Boston, there are 26 percent fewer homes to choose from than a year ago, and 21 percent fewer in Indianapolis and Kansas City.